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2021
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[2021] ZAGPJHC 479
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RPS Switchgear SA (Proprietary) Limited v ADI Investments (Proprietary) Limited and Others (2019/16201) [2021] ZAGPJHC 479 (4 October 2021)
REPUBLIC
OF SOUTH AFRICA
IN
THE HIGH COURT OF SOUTH AFRICA
GAUTENG
LOCAL DIVISION, JOHANNESBURG
CASE
NO: 2019/16201
REPORTABLE:
YES
/ NO
OF
INTEREST TO OTHER JUDGES:
YES
/NO
REVISED.
4/10/2021
In
the matter between:
RPS
SWITCHGEAR SA (PROPRIETARY) LIMITED
APPLICANT
AND
ADI
INVESTMENTS (PROPRIETARY) LIMITED
FIRST RESPONDENT
ESKOM
HOLDINGS LIMITED
SECOND RESPONDENT
MOGALE
CITY LOCAL MUNICIPALITY
THIRD RESPONDENT
DEPARTMENT
OF ENERGY
FOURTH RESPONDENT
MAGUDU
CIVILS (PROPRIETARY) LIMITED
FIFTH RESPONDENT
REYNECK
BUTHANI MAGUDU KHOZA
SIXTH RESPONDENT
JUDGMENT
WINDELL,
J:
INTRODUCTION
[1]
This is an application for the
payment of monies allegedly outstanding in terms of a contract
entered into between the applicant,
RPS Switchgear SA (Pty) Ltd,
(“RPS”) and the first respondent, ADI Investments (Pty)
Ltd (“ADI”). The application
was certified as a
Commercial Court case and after two case management meetings it was
referred to oral evidence. Only the first,
fifth and sixth
respondents oppose the application. The second, third and fourth
respondents, respectively “Eskom”,
"Mogale City"
and the “Department of Energy” are all interested
parties, hence their inclusion to the present
application.
[2]
During 2017, Mogale City instructed ADI to prepare a township
establishment plan in respect of the Matshelapata Informal Settlement
(“the Settlement”) in the municipal jurisdiction of
Mogale City. The electrification of the Settlement formed part
of
such plan. Eskom then appointed ADI as the developer of "the
Eskom Project”. The Eskom project entailed that ADI
had to
build and supply a network to supply electricity to 1149 households
in the Settlement before Christmas of that year. Electricity
would be
supplied from the Eskom mainline.
[3]
On 21 July 2017, RPS entered into an agreement with ADI in terms of
which RPS had to deliver 1149 electrical connections in
the
Settlement. The rate per connection finally agreed upon was R
10,557.47 excluding VAT. ADI also appointed the fifth respondent,
Magudu Civils (Pty) Ltd (“Magudu”), being specialists in
construction services, as ADI’s main contractor on the
Eskom
project. On 10 November 2017 RPS was requested to electrify a further
162 units at the Settlement and on 28 November 2017
it was requested
to electrify 6 further units. The unit price for the 168 additional
connections remained the same as had been
agreed in the letter of
appointment, to wit: R 10,557.47 excluding VAT per connection. The
total number of connections required
was thus 1317. The total
contract price became R 15,850,774.31 including VAT.
[4]
It is common cause that RPS delivered 1317 units before Christmas
2017 as required by the second respondent, Eskom. ADI had
paid RPS
the sum total amount of R 14,281,688.66 including VAT. RPS therefore
complained that ADI had failed to pay the full contract
price and
that it was indebted to RPS in the amount of R1,569,085.65. Despite
demand, ADI refused to pay, and RPS subsequently
issued the current
application. However, payment of the second retention in the amount
of R172 827.04 was not taken into account
at the time of the
launching of the application. RPS had now recalculated the amount
allegedly owed to it, and has reduced the
outstanding amount from
R1,569,085.65 to R 1,396,258.62.
[5]
ADI denies that it owes any money to RPS. It contends that the
agreement was varied or novated to the extent that material terms
were added which were: (1) Payments for labour and material were
separated and ADI would pay for materials provided after RPS has
submitted the invoices to ADI; and, (2) Any benefit or loss, in
respect of the purchase of the materials would accrue to ADI. ADI
therefore contends that the amount of R 1,396,258.62 is not due to
RPS, but is actually the amount that was saved by ADI on the
materials paid to the suppliers.
[6]
ADI also instituted a counterclaim in the amount of R2,698,508.13.
During argument the legal representative on behalf of ADI
conceded
that no there was no evidence in support of the counterclaim. It can,
therefore, not succeed.
[7]
After hearing evidence, the issues in dispute have ultimately
crystalized into only one narrow issue: Was the agreement between
RPS
and ADI varied, and if so what was the terms of the amended
agreement?
THE
EVIDENCE
[8]
RPS called one witness: its managing director Mr. Maurice Sheunesu
Makoni. Mr. Makoni confirmed the contents of the founding
and
replying affidavit. He explained that RPS and ADI had a previous
relationship between them arising from the township establishment
plan. After Eskom appointed ADI for the Eskom Project, RPS was
approached to make an offer to provide all the labour, material,
supplies, knowledge and expertise on the Eskom project. RPS then
prepared a written offer and submitted it to Magudu, who in turn
presented the document to ADI. The first offer was rejected on price
and ADI was not willing to make payment in terms of the proposed
payment schedule included in the offer, wherein RPS provided for
payment on a monthly basis, projected on its cash flow of the
project. RPS made a second offer in terms of which the price would be
R10,986.56 per unit and ADI would pay on certain percentage
or
activity completed. The second offer was accepted on 18 July 2017 and
RPS was appointed. The contract was a turnkey contract,
referred to
as an EPC contract, EPC being the acronym for Engineering,
Procurement and Construction. RPS’s appointment letter
was duly
signed by Mr. Ntshuxeko Ndlovu ("Ndlovu"), which is
described in the documents as the Quantity Surveyor of ADI
and the
Chief Operating officer of Magudu.
[9]
Mr. Makoni testified that after the second offer was accepted by ADI,
ADI requested RPS to reduce the price per unit even further.
He did
so, as he wanted the work. The price was therefore fixed at
R10,557.57 (excluding VAT) per unit and ADI confirmed the price
in
writing to RPS on 22 July 2017. Mr. Makoni testified that the
developer, ADI, was however paid an amount of R14 500 per
unit
by Eskom. This would ultimately result in a profit for ADI of more
than R5 million.
[10]
It is common cause that RPS invoiced separately for labour and
material. It was agreed that such invoices were to be supplied
to ADI
together with supporting documents as the Eskom project unfolded, to
make interim payments to RPS. In some instances, ADI
paid suppliers
directly, but in other instances payments were first made to RPS who
would then pay its suppliers as RPS had an
existing relationship with
such suppliers which granted RPS discounts and beneficial rates. One
of these suppliers was Voltex.
[11]
During his evidence Mr. Makoni referred,
inter alia
, to two
documents (Exhibits A and B). Exhibit A originated from ADI.
According to Exhibit A, ADI paid for certain materials directly
to
suppliers nominated by RPS. ADI accordingly deducted such amount from
the earmarked material spend. Further, Exhibit A confirms
that ADI
paid RPS a total amount of R13,439,263.90 instead of R15,850,774.31
on completion of the project. The balance outstanding
is an amount of
R 1,396,258.62. This is, however, reflected on Exhibit A as “project
savings from material”. Mr. Makoni
explained that Exhibit B is
a summary of all the invoices submitted by RPS to ADI. All the
invoices were paid by ADI except for
one: Invoice 993 submitted on 14
August 2017 in the amount of R1,396 258.62. It was noted that
the amount of invoice 993 and
the “savings” on material
is exactly the same.
[12]
On or about 10 November 2017, Mr. Travor Ncube, on behalf of ADI,
sent an email to RPS in which ADI instructed RPS to proceed
with 162
additional connections. On 28 November 2017, Mr. Ncube, sent a
further email in which RPS was instructed to proceed with
6
additional connections. Mr. Makoni testified that, save for
increasing the number of connections required, there was no variation
to the contract. Importantly, the unit price for the additional
connections remained the same as had been agreed in the letter
of
appointment, to wit: R 10,557.47 excluding VAT per connection. The
total contract price thus became R 15,850,774.31 including
VAT.
[13]
Mr. Makoni testified that it was agreed between ADI and RPS that
invoices for labour and material would be provided to ADI
on the 20
th
of each month to allow ADI to make payment by the end of each month.
It is common cause that there were several delays in the payment
of
the invoices. This led to labour unrest and delay in the delivery of
materials. During or about November 2017, Eskom became
concerned
about progress and adopted an intervention plan by deploying a
sub-contractor which cost R142,500.00. The intervention
plan was
deducted from the contract price. In addition, long lead time
materials were supplied directly by Eskom at a cost of R719,
787.61
which was also deducted from the contract price. During or about
November 2017, mitigation measures were implemented jointly
by ADI
and RPS as a result of the delay in finalization of the Eskom project
and additional 168 connections, which cost R907,711.39.
It was agreed
that fifty percent (50%) of that amount was to be borne by RPS in the
sum of R453,855.69. The 50% was deducted from
the contract price.
[14]
Mr. Makoni denied that there was ever a meeting held during which the
agreement was amended or novated.
[15]
Mr. Ndlovu gave evidence for ADI. He stated that after the agreement
was entered into, there was a meeting between him (representing
Magudu), Mr. Makoni, and Mr. Cornelius Chibanda (Mr. Chibanda) on
behalf of ADI. The meeting was held as a result of RPS’s
“about
turn” demanding that interim payments be made on its behalf,
because it did not have the funds to pay for the
materials. It was
agreed that, since ADI had the most to lose, that it would fund the
project. It was further expressly agreed
between the parties during
such meeting that, given this new demand, the risk associated with
taking on this additional requirement
to pay for materials, the
benefit or loss would accrue to ADI. He testified that as a result
any saving on the materials would
accrue to ADI. Mr. Ndlovu was
unable to recall the date of the meeting, and stated that the terms
agreed upon was not put in writing.
[16]
Mr. Ndlovu is the author of Exhibit A. He confirmed that this
document reflects the total cost of the contract entered into
with
RPS. He also confirmed that all the invoices reflected in Exhibit B
were paid except for one: Invoice 993 submitted on 14
August 2017 in
the amount of R1,396 258.62. Mr. Ndlovu explained that the
invoice was not paid as there were no supporting
documents from
suppliers, and that the amount was accordingly not due to RPS. He
testified that this amount reflects the savings
on material and that
it is a benefit that accrues to ADI.
THE
LAW
[17] It is trite that the
party alleging the contract must prove the terms of the agreement
which it seeks to enforce.
The terms of the
agreement on which RPS relies, are not in dispute. In its answering
affidavit the respondents did not plead an
additional term to an
existing agreement, but a totally different agreement from the one
RPS relied upon.
During evidence,
however, Mr. Ndlovu somewhat clarified this, and testified that the
agreement was varied by agreement between the
parties. The
onus
is therefore on ADI, not only to
prove an agreement to vary the terms of the agreement, but also the
terms of any alleged variation
and/or novation.
The
determination of this issue is essentially a factual one.
[18]
RPS called one witness, Mr. Makoni and ADI called one witness, Mr.
Ndlovu. Mr. Ndlovu testified that the agreement was varied,
whilst
Mr. Makoni disputed that there was any variation to the agreement.
When
a court is faced with two mutually destructive versions, it requires
the court, upon a conspectus of the evidence as a whole
and by
balancing probabilities, to select a conclusion which seems to be the
more natural or plausible (in the sense of acceptable,
credible or
suitable) conclusion, though that conclusion may not be the only
reasonable one.
[1]
In
National
Employers General Insurance v Jagers
[2]
the court held as follows:
“
Where
there are two mutually destructive versions the plaintiff can only
succeed if he satisfies the Court on a preponderance of
probabilities
that his version is true and accurate and therefore acceptable, and
that the other version advanced by the defendant
is therefore false
or mistaken and falls to be rejected. In deciding whether that
evidence is true or not, the Court will weigh
up and test the
plaintiff’s allegations against the general probabilities. The
estimate of the credibility of a witness will
therefore be
inextricably bound up with a consideration of the probabilities of
the case and, if the balance of probabilities favours
the plaintiff,
then the Court will accept his version as being probably true. If
however, the probabilities are evenly balanced
in the sense that they
do not favour the plaintiff’s case any more than they do the
defendant’s, the plaintiff can
only succeed if the Court
nevertheless believes him and is satisfied that his evidence is true
and that the defendant’s version
is false.
……
..It
is only where a consideration of the probabilities fails to indicate
where the truth probably lies, that recourse is had to
an estimate of
relative credibility apart from the probabilities”.
[3]
EVALUATION
[20]
Although ADI pleaded that it was Magudu and not ADI that entered into
the contract with RPS, this defence was not seriously
pursued during
the trial. The oral, and the documentary evidence relied upon by the
parties, clearly shows that the contract was
entered into between ADI
and RPS. As stated, the terms of the agreement were also not
disputed. The agreement, which is clearly
a turnkey contract, was on
a cost basis of R10, 557.47 per unit. ADI was the developer and
the funder of the project. In the
payment schedule in the contract,
the price per unit included labour and materials. There is no
evidence from either RPS or ADI
to suggest that there was any
variation to the price per unit. In fact, ADI confirmed the price per
unit and the total value of
the contract in Exhibit A as well as in
correspondence during November 2017.
[21]
In the answering affidavit ADI alleged that the meeting, during which
it was agreed to amend the contract between the parties,
took place
in August 2017. According to Mr Ndlovu, it was agreed during this
meeting that RPS would invoice separately for labour
and materials
and that any benefit or loss in as far as the payment for materials
were concerned would be for the account of ADI.
Mr Ndlovu’s
evidence on this aspect is not convincing. Firstly, he cannot
remember when the meeting took place. However,
so he says, it must
have been after the agreement was entered into. Secondly, RPS had
been invoicing separately for labour and
materials since the start of
the project. This fact is corroborated by Exhibit A. Thirdly, there
is nothing sinister about the
fact that the suppliers were paid by
ADI. These amounts were in any event all subtracted from the contract
price. The same result
would have been achieved if ADI paid RPS, only
for RPS then to pay the suppliers. Fourthly, in terms of the
contract, it was agreed
that RPS would be paid a certain amount per
unit. Included in the price per unit is the costs of material. The
price per unit was
never changed. Fifthly, if Mr. Ndlovu is to be
believed, the agreement was novated and/or amended in such a way that
would result
in RPS no longer receiving the agreed price per unit,
which would further result in RPS making zero profit. I find his
evidence
on this aspect highly improbable. This evidence is also at
odds with the email dated 10 November 2017, sent by Mr. Ncube from
ADI
to Mr. Makoni, wherein he requested that RPS install a further
162 connections and in which it was clearly stated that “the
rate per connection applicable to this additional scope will be as
per the original scope”. In other words, during November
2017,
long after the alleged meeting took place, the price per unit was
still R10,557.47 excluding VAT. The email makes no mention
of an
amendment or any discussion with ADI about RPS accepting a lower
price per unit. During argument ADI submitted that the email
of 10
November 2017 was from Mr. Trevor Ngube and, as he did not testify
what was meant by the email, one should not “read
into it too
much” and to request Mr. Ndlovu to clarify the meaning is
“legally unsound”. This argument is misconceived.
ADI
bears the
onus
to prove an amendment or novation of the
agreement. In the absence of any explanation, this email is, in my
view, dispositive of
the amendment issue.
[22]
Mr. Makone was a very good witness. I accept his evidence. There is
no plausible reason why he would agree to an amendment
of the
contract that would result in RPS making no profit.
Exhibit
A and B as well as the other documents relied upon, as well as the
common cause facts, all favour his version.
Mr.
Ndlovu’s evidence, on the other hand, is contradicted by the
objective documentary evidence. His evidence on the alleged
amendment
was unsatisfactory. He was also unable to explain the email of 10
November 2017 and why there was no written confirmation
of the
alleged amendment of the agreement. It is common cause that the
parties chose to conclude a written agreement which embodied
the
material terms agreed upon. On every occasion there was written
confirmation when there was a variation of the price per unit.
On a
balance of probabilities, I find it peculiar that in this instance
RPS would agree to terms that would result in zero profit,
but not
put it in writing. His evidence is rejected.
[23]
According to Exhibit B, ADI paid all the invoices except for invoice
993. The total amount of the unpaid invoice is R 1,396,258.62.
10.
This is exactly the same amount that is reflected on Exhibit A as
“project savings arising from material savings”.
On ADI’s
version, RPS was not paid R10,557.47 per unit, excluding VAT. There
was no amendment of the unit price and in terms
of the contract RPS
should have been paid R10,557.47 per unit, excluding VAT. I am
satisfied, on a balance of probabilities, that
ADI owes RPS an amount
of R 1,396,258.62.
[24]
in the result the following order is made:
1. Judgment is granted
against the first respondent, ADI Investments (Pty) Ltd, for the
payment of R 1,396,258.62.;
2. Interest on the
aforesaid amount at 9.5% from date of completion namely 7 May 2018
until date of payment, both days included;
3. The first respondent
to pay the costs of suit.
L.
WINDELL
JUDGE
OF THE HIGH COURT
GAUTENG
LOCAL DIVISION, JOHANNESBURG
(
Electronically
submitted therefore unsigned)
Delivered:
This judgement was prepared and authored by the Judge whose name is
reflected and is handed down electronically by circulation
to the
Parties/their legal representatives by email and by uploading it to
the electronic file of this matter on CaseLines. The
date for
hand-down is deemed to be 4 October 2021.
APPEARANCES
Attorneys
for the applicant:
Obert Ntuli Incorporated
Counsel
for the plaintiff:
Advocate N. Tee
Attorneys
for the 1
st
; 5
th
and 6
th
respondents:
Moodley Attorneys Inc
Counsel
for the defendants:
Mr G. Moodley
Date
of
hearing:
14 June 2021 & 15 June 2021.
Date
of judgment:
4 October 2021.
[1]
Hattingh
v Roux N.O and Others
2011 (5) SA 135 (WCC).
[2]
1984
(4) SA 437
(E) at 444 D-G.
[3]
Jagers
supra
at
441 A.